How To Validate PMF EffectivelyㅣSean Ellis, Hacking Growth

Summary

In this insightful discussion, Sean Ellis, the originator of the term 'growth hacking,' explains the challenges companies face in implementing growth hacking strategies. He emphasizes the importance of product-market fit and the necessity for cross-functional collaboration. Ellis highlights the significance of testing hypotheses across all growth levers, from acquisition to monetization, and stresses the value of a high volume of experiments over chasing a single perfect test. He also discusses how growth hacking can foster a more humble and cooperative company culture, focused on uncovering truths rather than asserting opinions.

Takeaways

• 📈 Growth hacking often fails because as companies optimize and test, the cost of acquiring customers through platforms like Facebook and Google increases, making it harder to find profitable customer acquisition strategies.
• 🧠 Sean Ellis, the coiner of 'growth hacking,' emphasizes that his strength lies in getting people to use good products, as evidenced by his work with companies like Dropbox, Eventbrite, and Lookout.
• 🎓 Ellis's initial foray into marketing was through formal education, but he found that it made him too academic and rigid, causing him to rethink his approach to marketing.
• 🤝 Growth hacking is a cross-functional effort requiring collaboration between product, marketing, engineering, design, and data teams, which many companies struggle to achieve as they grow.
• 🔍 Ellis advocates for a scientific approach to growth hacking, focusing on testing and analyzing across all levers of growth: acquisition, activation, retention, and monetization.
• 🎯 The most powerful lever for growth hacking is activation, which is crucial for driving customer engagement and retention.
• 🤔 Companies often fail at growth hacking not due to a lack of ideas or hypotheses but because they struggle to get different teams to collaborate effectively.
• 📊 The importance of running a high volume of tests cannot be overstated; the more tests conducted, the higher the chances of discovering a successful growth strategy.
• 📊 Product-market fit is essential before focusing on growth hacking; without it, customer retention is impossible, and any growth efforts will be unsustainable.
• 🤝 A shift in company culture towards humility and curiosity, driven by the iterative and experimental nature of growth hacking, can lead to more cooperative and effective teamwork.

Q & A

Why do most companies fail with growth hacking according to Sean Ellis?

Sean Ellis suggests that most companies fail with growth hacking not because they struggle to come up with hypotheses or test ideas, but because they can't get different teams to agree on how to work together effectively. As companies grow, they often become more specialized and siloed, which hinders the cross-functional collaboration required for successful growth hacking.

What is the significance of activation in growth hacking?

Activation is considered the most powerful lever of growth. It involves getting users to take the initial steps that lead to them finding value in the product, which is crucial for both engagement and retention. A great first experience is key to driving retention and encouraging users to return to the product.

How does Sean Ellis define growth hacking?

Sean Ellis defines growth hacking as a scientific approach to figuring out how to grow the business, involving testing and analyzing across all levers of growth from acquisition to activation, retention, and monetization.

What is the role of product teams in growth hacking?

Product teams play a significant role in growth hacking because there are many opportunities within the product to improve customer value and retention. However, they often spend half their energy convincing the product team to run experiments within the product.

Why is it challenging for companies to run experiments on products?

It can be challenging for companies to run experiments on products because different teams, such as product, marketing, engineering, and design, may have differing opinions on how to approach growth and testing. This can lead to friction and a lack of agreement on the best course of action.

What is the importance of product-market fit in the context of growth hacking?

Product-market fit is critical before focusing on growth hacking. It's the stage where users try the product and find it valuable enough to continue using it. Without product-market fit, companies can't retain customers, which is essential for sustainable growth.

How does Sean Ellis measure product-market fit?

Sean Ellis measures product-market fit by asking users how they would feel if they couldn't use the product anymore. He suggests that if around 40% of users say they would be very disappointed without the product, it indicates a strong product-market fit.

What is the significance of the retention cohort in determining product-market fit?

The retention cohort is significant in determining product-market fit because it shows the percentage of users who continue to use the product over time. If the cohort plateaus at a certain level, it indicates that those users find the product valuable enough to keep using it, which is a sign of product-market fit.

How does the volume of experiments relate to growth hacking success?

The volume of experiments is crucial for growth hacking success because it increases the chances of finding high-impact tests that drive growth. Sean Ellis emphasizes running a high velocity of tests, as every test is an opportunity to discover what works and what doesn't.

What impact does growth hacking have on company culture, according to Sean Ellis?

Growth hacking can lead to a less arrogant company culture where everyone becomes more curious and cooperative in seeking the right answers. It fosters a culture of testing and learning, which replaces assumptions with data-driven insights.

Why does Sean Ellis prefer to work with companies that have product-market fit but have not yet started growing?

Sean Ellis prefers to work with companies that have product-market fit but have not yet started growing because at this stage, the stock is still cheap, and he can get more stock options. This strategy allows him to potentially make more money if the company's growth takes off after he joins.